Stablecoin fight heads to showdown as senate Democrats splinter

The Senate is poised to advance industry-backed stablecoin legislation in a key vote expected Monday evening, with a group of crypto-friendly Democrats led by Kirsten Gillibrand and Angela Alsobrooks seeking to end their party’s blockade of one of President Donald Trump’s top priorities.

Senate Majority Leader John Thune last week filed a motion to end the Democratic filibuster and start consideration of the measure, with Republicans hoping to pass the bill before Memorial Day. That would require 60 votes and at least seven Democratic supporters.

Democrats united in opposition to an earlier effort to advance the bill, with crypto-friendly Democrats citing “numerous” concerns they wanted to address, including consumer protections, anti-money-laundering provisions and provisions affecting the regulation of foreign stablecoins like Tether.

A furor over the Trump family’s extensive and growing portfolio of crypto ventures further complicated matters, with many Democrats demanding a provision barring the president and senior officials from profiting off crypto ventures while in office.

They were incensed by a contest launched to boost sales of a Trump memecoin by offering a private dinner with the president and White House tours to top holders of the digital token, with some Democratic senators saying it smacked of corruption.

A stablecoin tied to the Trump family that has jumped to a market value exceeding $2 billion since it was announced in March also has stirred criticism.

But bipartisan negotiators agreed to changes to the bill over the past week to win back the group of crypto-friendly Democrats.

Democratic Senator Mark Warner of Virginia, an influential moderate on the Banking Committee, announced Monday he would support the bill. He said concerns over the Trump family’s business dealings shouldn’t sideline broader stablecoin legislation.

The legislation is “not perfect but it’s far better than the status quo,” Warner said.

Still, the party’s progressive wing led by Elizabeth Warren, the top-ranking Democrat on the Senate Banking Committee, remains vehemently opposed.

Warren released a new staff analysis attacking the bill, including the lack of any prohibitions on Trump and his family profiting off of cryptocurrencies his administration would regulate, as well as loopholes the analysis argues would allow criminals and terrorists to exploit stablecoins for transactions outside the traditional banking system.

“Passing this bill means that we can expect more anonymous buyers, big companies and foreign governments to use the president’s stablecoin as both a shadowy bank account shielded from government oversight and as a way to pay off the president personally,” she said. “For crooks, it’s a two-for-one.”

Warren also has repeatedly warned the bill doesn’t have enough safeguards to prevent stablecoins from endangering the financial system’s stability and that systemic risk could spur demands for taxpayer-funded bailouts if a major stablecoin fails. Unlike traditional bank accounts, stablecoins would not be covered by federal deposit insurance, leaving holders at the mercy of bankruptcy proceedings to try and get their money back if a token fails.

Bankers have also expressed concern about stablecoins siphoning off bank deposits and reducing access to credit, particularly for small businesses and farmers who often rely on the banks for loans. Bankers have lobbied — mostly unsuccessfully so far — to bar commercial firms like big tech companies or retailers from issuing their own tokens.

The bankers have won some key concessions, however, including a bar on stablecoins offering interest to depositors. Coinbase CEO Brian Armstrong has pushed against the prohibition, envisioning stablecoin accounts as eventually evolving into replacements for bank accounts. If stablecoins were allowed to offer interest or other bonuses, that could entice more consumers to abandon banks.

Retailers, meanwhile, have lobbied for the bill, hoping to profit from cheaper and faster transactions than traditional payment methods including credit and debit cards. Card swipe fees cost US merchants more than $187 billion last year, according to the Nilson Report trade publication.

The House Financial Services Committee has approved its own stablecoin measure, but it has not yet passed the chamber. Some House Republicans want to merge it with a follow-on bill governing regulation of crypto currencies more broadly. The House and Senate will have to reconcile any differences in legislation before sending a final version to Trump’s desk.

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